Dollar Hits 20-Year High as US Jobs Report Looms

The dollar was on track for its third weekly rise in a row and was trading at its highest levels in 20-years, with investors holding off sell ahead of US key job reports that could support interest rate hikes.

The dollar index, which measures the greenback’s value against a basket of six major currencies, hit a 20-year high of 109.99 during Thursday night’s New York session and was trading at 109.60 early Friday.

Since Federal Reserve Chair Jerome Powell unexpectedly stated at Jackson Hole that rates would need to be high “for some time” to manage inflation, the market has responded, sending the greenback up by more than 1% in the past week.

In response to the stronger US dollar, the euro dropped below parity again, this time to $0.9958, which is not far from last week’s 20-year low of $0.9905. The yen held steady at 139.91 per dollar after hitting a low of 140.27 in early Asian trading.

The US nonfarm payroll report for August is due on Friday (2 Sep). According to Dow Jones, economists forecasted a net increase of 318,000 jobs in August, which is lower than the 528,000 jobs added in July. The unemployment rate is expected to remain steady at 3.5%.

According to Reuters, investors may not enjoy a strong figure if it supports the Fed’s continued aggressive rate hikes, which may boost the US dollar and trigger a bond sell-off.